MDM - Model switches to buy on October 19, 2011

Published : October 19 2011 at 9:39 ET

Indices tend to correlate so today's continued strength in the S&P 500 and other indices should drag the NASDAQ-100 higher, despite the disappointing earnings from Apple Computer (AAPL). AAPL carries a 12.3% weighting in the NASDAQ-100 (reduced from 20.5%).

France and Germany agreed on a deal to expand the European rescue fund, and the Bank of England recently increased the size of its asset purchase program, financed by the issuance of central bank reserves, by £75 billion to a total of £275 billion. All of this means more quantitative easing is on the way. Signs are pointing to a market that can continue its move higher where junk stocks outperform leading stocks, perhaps in a similar vein to what occurred in 2009 when the U.S. Federal Reserve stepped in with its quantitative easing program.

The model has thus switched to a buy signal. Of course, keep in mind that other Euro-timebombs can go off so the model stands vigilant to reverse its signal if necessary.

Since we are still in a period of unusually high volatility, some members may prefer to pyramid into their position slowly, letting the price of their respective ETF(s) prove themselves before adding to their position(s).


Suggested ETFs:


IWM (Russell 2000)

SPY (S&P 500)


UWM (Russell 2000)

SSO (S&P 500)


TNA (Russell 2000)

UPRO (S&P 500)

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